Monday, June 25, 2007 – A federal judge in Utah has ruled that C.R. England not only violated truth-in-leasing regs, but that the motor carrier must provide an accounting of what happened to thousands of truckers’ escrow funds.
Leaders of the Owner-Operator Independent Drivers Association said the ruling by U.S. District Court Judge Ted Stewart has the potential to be far-reaching in terms of the impact it could have on the entire trucking industry.
“It essentially validates the leasing rules and the owner-operators’ rights to file in federal court to enforce those rules,” said Jim Johnston, OOIDA president and CEO.
“We’ve had a lot of good precedents in our lawsuits, but this is really the first suit that has gone to trial on the merits – the merits being the actual wording of the truth-in-leasing regulations – and this court has validated those truth-in-leasing regulations right down the line.”
OOIDA filed the case against the carrier in June 2002 along with five of its owner-operator members. It was certified as a class action in August 2005. The class of plaintiffs includes all owner-operators who entered into a lease agreement with C.R. England from June 1998 to August 2002.
The judge ruled that C.R. England’s lease during that time violated federal regulations by failing to specify charge-back items and forcing the purchase of services. He also found that the motor carrier had improperly managed truckers’ escrow accounts.
The judgment against the Salt Lake City-based motor carrier came about six months after the conclusion of a two-week trial in October 2006.
In his written opinion, Judge Stewart rejected C.R. England’s argument that the leases in question substantially complied with the regulations. The judge determined that the appropriate standard in determining violations was one of strict compliance – not substantial compliance.
“I think all truckers and motor carriers should take note of this victory and its affirmation that strict compliance of the regulations is the only acceptable alternative,” Johnston said.
“After five years of hard-fought litigation, the court found that the leasing regulations mean what they say and that motor carriers must come clean in their lease agreements and disclose all mark-ups, profits and any administrative fees.”
The judge ruled that C.R. England’s lease failed to disclose that the motor carrier was marking up tires and parts purchased by owner-operators by 30 percent and that the company charged owner-operators a 60-percent mark-up on fuel discounts it received from truck stops.
Judge Stewart ruled that, while the leasing regulations do not prohibit a motor carrier from making a profit on charge-backs, such mark-ups and profits must be disclosed in the owner-operators’ lease agreements.
Also, the judge found that C.R. England charged owner-operators for undisclosed repair-related “administrative charges,” as well as an undisclosed $500 “termination fee” and an undisclosed $10 “termination letter” charge, all of which violated the leasing regulations.
The judge also determined that C.R. England unlawfully forced owner-operators to purchase satellite communications and administrative services as a condition of entering into a lease.
In its complaint, OOIDA asked the court to declare C.R. England’s practices unlawful, to make C.R. England disgorge its “ill-gotten” gains, make restitution, provide accountings for owner-operator escrow funds and to order the return of escrow funds improperly retained by the motor carrier.
Within months after OOIDA filed the complaint, C.R. England scrapped its lease document and required all of its owner-operators to sign a new agreement. The new version disclosed all of the mark-ups, administrative and transaction fees. Judge Stewart found that the new lease, which the company has used since August 2002, complies with the leasing regulations in all respects.
However, in his written ruling on June 20, Judge Stewart ordered that C.R. England undertake a class-wide accounting of the escrow funds it managed under the previous version of its lease, which the judge ruled was in violation of Section 376.12 of the federal regulations. He gave the motor carrier 30 days to file a written proposal regarding the accounting of the truckers’ escrow money.
Judge Stewart noted that C.R. England’s previous lease failed to comply with the most basic escrow fund requirements of the regulations – namely, that a lease must set forth specific items to which the escrow funds may be applied. C.R. England’s lease failed to specify the items which could be deducted from the maintenance escrow, the security deposit/performance bond, and the fuel/road tax escrow.
OOIDA produced evidence at trial that C.R. England retained more than $6.3 million in owner-operator escrow funds. OOIDA will seek the return of all improperly retained escrow funds during the accounting phase of this case.
Johnston said he was encouraged by the fact that the judge has ordered C.R. England to account for every penny of every escrow fund. He said the Association would continue to fight for the return of all unlawfully retained escrow funds.
Johnston indicated that there were also some issues that OOIDA would probably look to the appeals courts to revisit. Specifically, the Association may appeal the decision to deny its request that C.R. England be ordered to return the undisclosed mark-ups and administrative fees as restitution for violations of federal law. The trial judge disagreed with OOIDA’s position, concluding instead that plaintiffs and class members were limited to “damages sustained” by the drivers.
– By Land Line staff